Gold Edges Higher After Weekly Decline as Weak Jobs Data Weighs on Fed Rate Hike Bets
Gold prices edged higher on Monday after posting their biggest weekly decline since June, as signs of weakness in the US labor market reduced expectations for another Federal Reserve interest rate hike. However, elevated Treasury yields and rising oil prices continued to weigh on the precious metal.
At 08:40 WIB, XAU/USD rose 0.3% to $4,153.66 per troy ounce, after falling 3.4% last week. XAG/USD gained 1.3% to $61.15, following a decline of more than 6% last week, its biggest weekly drop since mid-July. Platinum and palladium also moved higher, while the US dollar was little changed after strengthening for three consecutive weeks.
Weak Payrolls Ease October Fed Rate Hike Pressure
US nonfarm payrolls increased by just 29,000 in September, according to data released last Friday, falling well short of economists' expectations. The weaker employment figures have reduced pressure on the Fed to raise borrowing costs quickly in response to persistent inflation.
Markets are now pricing in roughly a 20% probability of a rate hike in October, down sharply from around 70% a week earlier. Higher interest rates typically reduce the appeal of gold because the precious metal does not generate interest income.
The weakening labor market comes after gold prices fell more than 6% in September, marking their largest monthly decline since June. The selloff was driven partly by concerns that energy-driven inflation could keep interest rates elevated for longer.
Nevertheless, Fed officials have continued to push back against expectations of an imminent rate hike. The Federal Reserve's September meeting minutes, when policymakers raised interest rates for the first time in three years, are due for release later this week and could provide further clues about the outlook for US monetary policy.
Rising Oil Prices Keep Inflation Risks Elevated
Inflationary pressures remain a concern as oil prices rise amid escalating tensions in the Middle East. In Yemen, Saudi-backed forces launched an operation aimed at retaking areas controlled by the Iran-backed Houthi group.
Higher energy prices could keep inflation elevated and complicate the Fed's policy outlook, even as weaker payroll data reduces the near-term pressure for another rate hike.
Treasury yields also remain elevated, with several maturities trading near their highest levels in more than two decades. US Treasury Secretary Scott Bessent played down concerns over rising borrowing costs, saying higher yields are broadly in line with global trends.
For gold, the combination of weaker US employment data and reduced expectations for an October Fed rate hike provides some support. However, elevated Treasury yields and renewed energy-driven inflation risks continue to limit the precious metal's upside potential, according to ANZ.